Severance pay crucial for a redundancy to be fair

Cases

Severance pay crucial for a redundancy to be fair

To avoid the possibility of an otherwise valid redundancy being rendered harsh, unjust or unreasonable, employers must pay severance pay in addition to applicable notice requirements.

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To avoid the possibility of an otherwise valid redundancy being rendered harsh, unjust or unreasonable, employers must pay severance pay in addition to applicable notice requirements.

Von Doussa J of the Industrial Relations Court of Australia has ruled that a finding of harshness need not be related to the reason for termination. Von Doussa J held, in the case at hand, that although the redundancies were genuine, the failure of the employer to pay the relevant employees’ severance pay made the dismissal unfair.

The employer had in fact paid the redundant employees in excess of 6 months notice, a period through which the employees continued to work, and which was an amount intended by the employer to cover for both severance pay and notice.

The Court held however that the long period of notice did not compensate for the lack of severance pay because the two payments (severance pay and notice) are made for different reasons.

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